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West African countries plan to hike cocoa prices, citing ‘injustice’ in chocolate industry. Can they reduce child labor?

The price hike could help improve farmers’ lives, experts say.

A worker is seen standing on dried cocoa beans outside a cooperative facility in the village of Gloplou, Côte d’Ivoire. (Salwan Georges/The Washington Post)

While the global chocolate industry takes in an estimated $100 billion annually, many of the hundreds of thousands of West African cocoa farmers, who provide most of chocolate’s key ingredient, live in poverty.

This imbalance amounts to a “manifest injustice,” Ghanaian President Nana Addo Dankwa Akufo-Addo said last month.

Now the world’s leading cocoa producers, Ghana and Ivory Coast, are joining in an attempt to raise the commodity’s price, a move government officials say will boost farmer incomes, reduce the incidence of child labor and give West African farmers a more equitable cut of global chocolate profits.

“We will not continue to be victims or pawns of the global cocoa industry that is dependent on the work of our farmers,” Akufo-Addo said at a state dinner after the proposal was announced.

Mars, Nestle and Hershey pledged nearly two decades ago to stop using cocoa harvested by children. Yet much of the chocolate you buy still starts with child labor.

Quickly dubbed “cocoa-pec” after the OPEC cartel established by oil-producing countries, the controversial plan is expected to be the subject of a meeting Wednesday between industry representatives and political officials.

As a start, the two-country cartel would set the minimum price for a ton of cocoa at $2,600, roughly 10 percent above the world price at the time of the announcement. In announcing the proposal last month, the countries, which produce about 60 percent of the world’s cocoa supply, said they were suspending cocoa sales “for the time being.”

“The goal is to protect producers and their families from the various fluctuations in cocoa prices,” Benjamin Walker, of the Ivory Coast government’s cocoa board, said by email to The Washington Post. As for curbing child labor on cocoa farms, “this can only be positive as everyone recognizes that one of the causes of this phenomenon is poverty. Partly because of poverty, some parents find it difficult to send their children to school.”

Consumers would be unlikely to notice a significant change in the cost of a chocolate bar — cocoa is just one of several ingredients — but the world’s chocolate companies have responded cautiously to the proposal.

The industry has repeatedly faced criticism stemming from its West African cocoa supply: While global profits are in the billions, cocoa production in West Africa has been blamed for impoverishing cocoa farmers, relying on widespread child labor and, in part, the deforestation of millions of acres.

The typical farm family makes as little as $2,400 annually, and, according to a 2015 U.S. Labor Department report, more than 2 million children were engaged in dangerous labor in West African cocoa-growing regions. While most of the child laborers on West African cocoa farms are working on family plots, thousands are believed to have been trafficked from other African countries. Washington Post journalists spoke with a dozen such children during a trip in March.

Exactly how the governments’ proposed cocoa price floor would alleviate farmer poverty, however, is unclear.

In Ghana and Ivory Coast, the cocoa harvest is highly regulated and critical to the economy: In Ghana, a government board sets the price and then sells the cocoa to exporters, typically at higher prices. In Ivory Coast, cocoa exports are heavily taxed.

Listen on Post Reports: Can West Africa countries regulate the price of cocoa?

In sketching out the proposal last month, the government did not disclose how much of the higher price would go to farmers. Nor did the presentation discuss how the countries would prevent the higher price from spurring surpluses and more deforestation, which already has spread into national parks.

“Hershey has long supported programs and initiatives that improve the livelihoods of farmers,” Hershey spokesman Jeff Beckman said by email. “So we look forward to seeing more substantive details on these proposals before commenting on the plans.”

“We support moves by governments to intervene to achieve a higher price so long as this results in a sustainable increase paid to the farmer and is supported with governance to ensure there is no further expansion of land use to grow cocoa,” Mars said in a statement.

Groups seeking to eradicate child labor on West African cocoa farms praised the move, noting that the price hike could reduce the economic desperation that leads to child labor.

While the proposed price increase is too small to eliminate farmer poverty, the modesty of the price increase means that the world’s cocoa buyers are less likely to turn to other sources for cocoa.

“The $2,600 per ton they have proposed is not a strange number — they were paying that a few years ago,” said Antonie Fountain, managing director of the Voice Network, an umbrella group seeking to end child labor in the cocoa industry. “It won’t break the bank.”

At a presentation on the proposal last month, the governments presented a chart showing industry profits ranging between $10 billion and $20 billion annually, despite dips in the cocoa price.

Exactly how much farmer incomes would have to rise to eliminate child labor on cocoa farms has been a matter of debate. A few small companies have raised the prices they pay for cocoa by as much as 40 percent.

An academic analysis published last month found that raising the prices paid to farmers by 12 percent could eliminate the worst forms of child labor in Ghana.

Jeff Luckstead, a University of Arkansas professor and co-author of the analysis, said that the 12 percent increase would not eliminate poverty but that it would be enough to compensate a farmer for the loss of child labor.

“You can’t just tell people to reduce child labor because that will just force them deeper into poverty,” Luckstead said. “Raising prices would be an inducement to give up child labor.”

The biggest challenge to the cocoa cartel, however, might simply be the forces of world economics. While OPEC, the oil cartel, has had success, several other commodity cartels — including those for tin and coffee — began with high hopes but struggled after the higher prices led to more competition.

Farmers, meanwhile, have offered varying opinions on the proposal. While they generally favor raising prices, at least one farmers group would prefer that the governments get out of the cocoa business — and stop acting as an intermediary between cocoa farmers and the world market. Warren Sako, secretary general of a group called the World Cocoa Farmers Organization, said his group would prefer to be able to negotiate directly with world markets.

“Why should the government set the price?” Sako said. “Cocoa is produced by millions of individuals, independent cocoa farmers. The government should not be setting prices for which they do not grow.”